GCC Equity Mutual Funds - Markets end Q2 in the red

01/08/2010

In a recently published quarterly report by Kuwait Financial Centre "Markaz", which aims to analyze the performance of equity funds across the region, GCC markets sustained heavy losses in 2Q10, completely reversing the 1Q gain of 12%. All markets saw declines; the heaviest being a 22% loss in MSCI UAE as the market continues to grapple with the Dubai World dent issue in addition to other corporate weaknesses. Investor sentiment was also dampened by signs of a slowing global economic recovery. May was a particularly vicious month as negative global cues and tumbling oil prices (crude oil lost 15% in the month) led to panicked selling by investors leading the MSCI GCC to tumble 11% in the month which was the first monthly decline of the year.  

The quarter’s best performer was MSCI Qatar which limited the loss to 4% for 2Q10 after gaining 6% in the previous quarter.

GCC Equity funds had an asset weighted loss of 8% in June 2010 as negative markets dragged down performance across the region.

AUM’s was USD 10.8 bn in 2Q10 representing an institutionalization rate (AUM/Mcap) of 1.5%. Both Saudi Arabia saw its AUM contract 14% in the quarter.

Assets under Management – June 2010

Source: Markaz Research

Asset Allocation Trends– GCC Equity Funds (June 2010)

Fund managers continue to favor Saudi Arabia, with an allocation of 45%. Confidence in the Kuwait market remains at 12%; UAE allocation was up to 13% in June after declining to 10% in December 2009.

Geographical Allocation - Equity Funds

Risk aversion increased in June as fund managers upped Cash allocation to 11% from 7% in March while exposure to equity was down to 89% from 93% in March.

Saudi Arabia Equity Funds

The Tadawul index lost 10% in 2Q10 due to an 11% decline in May as crude oil prices tumbled, leading to aggressive selling. All sector indices saw quarterly declines except Retail which managed to gain 3%. Consequently, AUM’s contracted 14% to USD 4.66 bn.

Fund managers maintained their exposure to equities at 98% in June 2010 versus a low of 96% in June 2009, while allocation to Cash & Equivalents remained at 2%.

Top Five Fund Managers (in terms of AUM June-10)

The Kuwait market lost 13% in 2Q after gaining 8% in the previous quarter. Losses were led by the investment sector, down 20% and real estate with a loss of 17%. AUM’s contracted 8% to USD 3.6 bn in 2Q10.

Top Five Fund Managers (in terms of AUM in June 2010)

Qatar Equity Funds

After losing 6% in 4Q09, Qatar’s Doha Securities Market (DSM) lost 7.5% in 2Q, reversing its first quarter gain. Only insurance saw a positive performance, gaining 25% for the quarter. Value traded fell 48% YoY to USD 5.1 bn for the quarter.

AUM’s for Qatari equity funds were down 5% to USD 149 mn.

Other GCC Equity Funds

UAE Equity Funds - Dubai (DFM) underperformed the Abu Dhabi Exchange (ADX) for the quarter, losing 21% versus a loss of 13.5% for the ADX. The DFM’s loss was led by Telecom and Investments, down 29% and 27%, respectively. Abu Dhabi’s loss was led by Real Estate, down 36% for the quarter.

Liquidity in the UAE was down; value traded declined 68% YoY to USD 7.35 bn.

AUM’s for UAE equity funds continue to contract, declining 3% in 1Q10 to USD 592 mn.

Oman Equity Funds - The Muscat Securities Market (MSM) lost 9.55% in 2Q after gaining 5.16% in 1Q10. AUM’s for Omani equity funds contracted 12% to USD 51 mn.

Bahrain Equity Funds - The Bahrain Exchange lost 9.75% in 2Q10. Sectoral returns were negative, led by a 13.5% loss in Investments. SICO Selected Securities Fund outperformed the benchmark, MSCI Bahrain index, which lost 20% in 2Q10.

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About Kuwait Financial Centre “Markaz”

Kuwait Financial Centre S.A.K. 'Markaz', with total assets under management of over KD921 million (USD3.19 Billion) as of March 31, 2010, was established in 1974 has become one of the leading asset management and investment banking institutions in the Arabian Gulf Region. Markaz was listed on the Kuwait Stock Exchange (KSE) in 1997.